The climate crisis is one of the biggest challenges of our time.
As the impacts of climate change become more apparent, including heatwaves, drought, wildfires and flooding, an increasing number of investors are asking how their portfolios can contribute to the world’s crucial transition to net zero.
Industries such as green energy, electric vehicles and other green technologies are not only needed to help create a sustainable planet – they can be an exciting long-term investment opportunity. Below are four positive impact funds with a specific focus on tackling climate change.
You can invest in these funds either through an online platform such as The Big Exchange, AJ Bell or Hargreaves Lansdown or via your Independent Financial Adviser. They can be held within a Stocks and Shares ISA or Self-Invested Personal Pension (SIPP).
The Climate Action Portfolios from EQ Investors – a Good With Money ‘Good Egg’ firm – focuses on companies that are ‘best-in-class’ when it comes to climate policies and/or have exposure to green transition initiatives, lower carbon intensive sectors, or climate-focused engagement practices.
The portfolios include:
- Low carbon leaders – companies that have already reduced their carbon emissions by 33 per cent compared to their peers. They have advanced climate risk management processes already built into their business models, operations, and supply chains.
- Climate solutions – companies whose products reduce carbon emissions across a wide range of industries, and green bonds that are being issued to directly finance the climate transition.
- Transition companies – strongly profitable businesses with credible, science-based plans to reduce their emissions, as well as those where EQ managers see an opportunity to engage for change.
The eight portfolio options (according to the level of risk you’re comfortable with) are a good diversified approach to investing as they invest across different asset classes.
The carbon footprint of investing £1 million in the EQ Climate Action All Equity portfolio is 42 per cent lower than investing the same amount in global equities. You can download the first annual Climate Action Progress report here.
The Multi-Asset Climate Solutions (MACS) Fund was launched by The Big Issue Group in partnership with Aberdeen Standard Investments in 2021. The fund actively searches the globe for companies that get at least half of their revenue from climate change solutions and other key environmental challenges. Currently, less than five per cent of the world’s companies fit the bill.
While its focus is on solutions, the fund won’t invest in any companies involved in activities that harm people or the planet. These include fossil fuels, tobacco, weapons, unethical practices such as child labour, and companies which have high carbon emissions.
A fifth of the net revenue from the fund is reinvested back into The Big Issue to help support its mission of dismantling poverty for now and future generations.
Launched in 2022, the EdenTree Green Future Fund aims to invest in companies that are providing sustainable solutions to the world’s environmental challenges. It invests in seven areas; alternative energy, energy efficiency, circular economy, environmental services, water management, future mobility and regenerative agriculture.
As the world becomes increasingly aligned with a sustainable future, EdenTree believes that those business models that are providing solutions for a more resource-efficient economy will see greater demand and be able to deliver higher returns on investment over the long term.
EdenTree says it will not invest in any company with “material involvement in activities that are deemed to be harmful to the planet and society.”
The M&G Climate Solutions Fund, launched in 2020, invests in companies that it believes can deliver solutions to the challenge of climate change. The fund focuses on three main impact areas – clean energy, green technology and the promotion of a circular economy.
It embraces the United Nations Sustainable Development Goals (SDGs), which encompass the most pressing challenges facing people and the planet.
The fund’s holdings cover:
- Pioneers – Companies transforming society or the environment by what they do.
- Enablers – Organisations that help others deliver impact.
- Leaders – Companies setting the pace for sustainability in their industry.
The Sustainable Climate Solutions Fund from Fidelity, launched in 2021, invests in global companies that are developing low carbon technologies and solutions to materially cut greenhouse gas emissions.
It covers three themes:
- The replacement of internal combustion engines with electric vehicles.
- The shift from fossil fuels towards renewable power generation.
- The circular economy (e.g recycling), shifting consumer patterns (e.g. alternative meats), and improvements to create more environmentally efficient infrastructure.
Aviva’s Climate Transition Global Equity Fund invests in companies and assets driving fundamental changes toward a sustainable future. Its investments target the two Sustainable Development Goals of ‘Affordable and Clean Energy’ and ‘Climate Action.’
The fund excludes the ‘most carbon-intensive’ fossil-fuel companies. It then invests in companies that are either mitigating or adapting to climate change, or are aiming to transition. Aviva says it uses its size and influence to engage with its portfolio companies for positive change.
Risk warning: Remember that when you invest, your capital is at risk.
While we mention specific funds here, this is not intended as financial advice. If you invest in any of the funds mentioned in this list, you do so at your own risk.